Plaintiffs charging that a law firm and two other entities schemed to fraudulently obtain more than 100,000 consumer debt default judgments through the use of "sewer service" cleared a major hurdle on Sept. 4 by winning class certification.

Judge Denny Chin (See Profile) certified two classes alleging that the law firm of Mel Harris and Associates in Lower Manhattan and two other entities engaged in sewer service—the intentional failure to serve a summons and complaint followed by the filing of a phony affidavit attesting to service.
Sewer service, named after the practice of throwing a summons and complaint into the sewer outside of a defendant's home and then claiming to have effectuated service, leaves defendants unaware they are due in court.

Chin, a Second Circuit judge who continues to preside over cases from his time on the Southern District bench, agreed with the plaintiffs that class treatment is appropriate for their claims under the Fair Debt Collection Practices Act, 15 U.S.C. 1693; the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §1961; New York General Business Law §349; and New York Judiciary Law §487, under which an attorney can be liable for damages, and charged with a misdemeanor, for engaging in "any deceit, or collusion, or consents to any deceit or collusion, with intent to deceive the court or any party."

Harris and Leucadia allegedly joined to purchase debt portfolios and begin en masse debt collection, filing 104,341 debt collection actions in New York City Civil Court between 2006 and 2008. While Samserv was hired to serve process, the plaintiffs charge that more than 90 percent of the debtors were never served.

They claim that once the consumer failed to appear, Harris and Leucadia provided proof of service, proof of additional mailed notice and, allegedly, a bogus "affidavit of merit" swearing to their personal knowledge of the facts substantiating their claims.

Chin said the record showed the defendants obtained "tens of thousands" of defaults "based on thousands of affidavits attesting to the merits of the action that were generated en masse by sophisticated computer programs and signed by a law firm employee who did not read the vast majority of them and claimed to, but apparently did not, have personal knowledge of the facts to which he was attesting."

That employee was Todd Fabacher, the director of information technology at Mel Harris, who signed as many as 350 affidavits of merit per week, or, as Chin said in a prior opinion "one every three minutes."

Chin also said the record shows that "on hundreds of occasions the defendant process servers purported to serve process at two or more locations at the same time."

He added, "There were also many other occasions where multiple services were purportedly made so close in time that it would have been impossible for the process server to travel from one location to the other as claimed."

All told, between 2006 and 2009, Leucadia or its subsidiaries filed 124,838 cases in Civil Court, and Mel Harris lawyers were counsel in over 99 percent of those cases. Between 2007 and 2010, Leucadia entities obtained defaults in 49,114 cases.

Chin last year denied the defendants' motion to dismiss (NYLJ, Jan. 4, 2011) and heard oral argument on the class certification issue last Oct. 11.

The first class he certified on Sept. 4 is defined as "all persons who have been or will be sued by the Mel Harris defendants as counsel for the Leucadia defendants in New York City Civil Court and where a default judgment has been or will be sought."

The second class is "nearly identical" but is limited to persons who "have been sued" and had a default judgment entered against them.

"Needless to say, we are very disappointed in Judge Chin's decision and intend to appeal to the [Second] Circuit," Scher said yesterday in a statement. "It's important to note that this decision in no way addresses the merits of the case, and has no bearing on liability, but simply allows the case to move forward as a class."

The Samserv defendants are represented by Jordan Sklar of Babchik & Young in White Plains. Sklar declined to comment.

Lewis Goldfarb of McElroy, Deutsch, Mulvaney & Carpenter, in Morristown, N.J., who represents the Leucadia defendants, said his clients intend to appeal the class certification decision to the Second Circuit.

The respondent-tenant was represented at the hearing by Malikah Sherman, of Counsel to Joan L. Beranbaum, DC 37 Municipal Employees Legal Services.

The petitioner-landlord was represented by Marcia W. Brathwaite.

DECISION/ORDER

505 West 143rd Street HDFC, the petitioner in this proceeding ("Petitioner"), commenced this holdover proceeding against Charlene Coppedge, the respondent in this proceeding ("Respondent"), seeking possession of 505 West 143rd Street, Apt. 43, New York, New York ("the subject premises") on the ground that Respondent's lease expired and that no regulations require a renewal of the lease. Respondent raised a defense of lack of personal jurisdiction. The Court held a traverse hearing over the course of two dates.

A process server testified at the traverse hearing. He testified that he made two attempts at service of the petition and notice of petition on Respondent, one on December 10, 2012 at 7:28 p.m. and one on December 11, 2012 at 11:05 a.m. He testified that no one responded to his knocking at the door of the subject premises on both occasions and that he effectuated conspicuous place service pursuant to RPAPL §735. The process server introduced into evidence his logbook, which had entries that were consistent with his testimony, which were both consistent with the affidavit of service in the Court file.

Despite the fact that the process server testified that he made entries in his logbook in a contemporaneous and accurate manner, the process server admitted on cross examination that he has made incorrect entries on his logbook. The process server's logbook contains an entry after he alleged to have served Respondent, but on the same day, December 11, 2012, at 12:36 p.m., in Midtown Manhattan. The process server admitted that this entry was inaccurate, and inconsistent with his averment on an affidavit that he actually attempted service at that location at 3:02 p.m. that same day. The Court also notes that the logbook shows an alleged attempt at service in Midtown Manhattan six minutes after an attempt at service on Wall Street, which does not appear to be physically possible.

The difficulty with the process server's logbook entry is that both his logbook and an affidavit of service shows service upon the Midtown address at 12:36 p.m. the following day, December 12, 2012. Assuming arguendo the accuracy of this entry, the Court draws the inference that the process server did not make the entries for December 11, 2012 until at least December 12, 2012, when he apparently mistakenly duplicated the 12:36 p.m. entry as the time for the December 11, 2012 service rather than the December 12, 2012 service. If the process server did not make entries in his logbook for December 11, 2012 contemporaneously, the entry for his service upon Respondent on that date is also called into question. This questions damages the credibility of a process server whose business duty is to maintain accurate records. Barr v. Department of Consumer Affairs, 70 NY.2d 821, 823 (1987).

Testifying on her own behalf, Respondent gave a detailed ­ and somewhat rigorous ­ account of her daily routine in retirement, according to which she is regularly at home during the times at which the process server alleges that he attempted service. Respondent testified that she did not hear anyone at her door at those times. When the credibility of a process server is compromised by the exposure of his or her inaccurate records, such testimony has been found to support a traverse defense. Masaryk Towers Corp. v. Vance, 12 Misc.3d 1172A (Civ. Ct. N.Y. Co. 2006).

Petitioner argues that Respondent ultimately received notice of this proceeding anyway. However, a party's actual receipt of pleadings does not relieve a plaintiff or petitioner from the obligation to comply with statutory service requirements. 10 E. End Ave. Owners. Inc. v. Gordon, 23 Misc.3d 139A (App. Term 1st Dept. 2009), quoting 72A Realty Assocs. v. New York City Envtl. Control Bd., 275 A.D.2d 284, 286 (1st Dept. 2000).

Petitioner also argues that the process server's Global Positioning System ("GPS") records demonstrate that he was actually at the subject premises, regardless of the contents of the logbook. Given the fact that the requirement that process servers carry GPS devices is new enough that authority with regard to the admissibility of GPS records is undeveloped, the Court held in abeyance Petitioner's offer of GPS records at the hearing.

Department of Consumer Affairs regulations require that process servers use an independent third party to maintain the GPS records, and that this independent third party must fulfill certain requirements. 6 R.C.N.Y. §2-233b(a)(3). One requirement is that the independent third party must maintain the GPS records so as to insure that their integrity is adequate to be admissible according to rules of evidence that apply in the state of New York. 6 R.C.N.Y. §2-233b(a)(4)(iv). Another requirement is that the independent third party must produce a copy of applicable GPS records certified to be true and accurate upon receipt of a subpoena. 6 R.C.N.Y. §2-233b(a)(4)(v).

While the process server did offer GPS records. Petitioner laid no foundation for the admissibility of the GPS records by an independent third party that maintains the GPS records. Allowing the process server himself to lay the foundation would undermine the purpose of the new regulation, which is in part to assure that the source of the records is independent and disinterested. Accordingly, the Court does not find that a foundation has been laid for the admissibility of the GPS records.

On the evidence before the Court, then, the Court finds that Petitioner has not met its burden of proving that it served the notice of petition and petition upon Respondent in compliance with RPAPL §735. The Court sustains the traverse and dismisses the notice of petition and petition, without prejudice to the claims, causes of action, rights, and/or defenses of any party to this litigation.

The parties are directed to pick up their exhibits within 30 days or they will either be sent to the parties or destroyed at the Court's discretion and in compliance with DRP-185.